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Apple buys $ 400 million from Shazam: Lessons from a wounded unicorn

The acquisition of Shazam by Apple is undoubtedly great news for the booming startup scene in Europe. What is less clear is whether they are good or bad news.

Founded in 2004, in the pre-iPhone era, Shazam is a remarkable story of resistance. But just three years ago, it was reported that the company was on track for an IPO of $ 1.2 billion when its music recognition application approved the 100 million download mark.

Then, only a few months later, there was talk that the IPO had been pushed back to 2015. Instead, the company raised $ 30 million in a Series F financing round in February 2015, bringing its funding total was $ 143.5 million.

Surely these sponsors saw something when they looked at the numbers in 2015. But that something apparently never materialized.

Because, according to those measures, the $ 400 million that TechCrunch reported that Apple paid to acquire Shazam are not many. It is difficult to imagine that the sponsors of the F Series got a reward for their problems, although perhaps at least they recovered their money.

That sale price has many ominous signs for the unicorn stable with ungainly valuations above $ 1 billion. In an e-mailed statement, Mark Tluszcz, CEO of Mangrove Capital Partners and president of Wix.com, warned that Shazam's low price should serve as a warning that a large correction will occur after a period of excess equity capital. risk. [19659002] "I firmly believe that a company is not worth a billion dollars until it is sold or it is over," he said. "Many of these so-called unicorns are, of course, fakies, in fact they celebrate winning the cup final before the break, but they will face their day of scores and they can be a disappointment." Shazam's case will serve as a tough one. warning for other companies. "

Naturally, Nenad Marovac, founder and CEO of DN Capital, does not agree. One of Shazam's first investors, Marovac believes that Shazam represents a great victory for the startup ecosystems of the United Kingdom and Europe.

In a blog post, Marovac recalled some of Shazam's incredible journeys and milestones: "In 2009, Apple called us to ask:" Can you create an application over the weekend to appear in the store? " from iTunes? It turned out that we could. "Rahul Powar, who was the company's lead engineer at the time, created the Apple Shazam application, which was essentially very similar to the version in use today. of the first applications in the App Store, and one of the most popular ".

He added: "Nor should we forget that Shazam has become one of the most successful technology companies in the United Kingdom in terms of global reach: the application is found in more than one billion phones worldwide and is used by There are not many British applications with that level of coverage, nor the global brand recognition that Shazam has created, in fact, the company is as global in terms of users and markets as the fact that it is British origin is sometimes overlooked. "

The actual lessons, however, can go beyond valuations or geography. Fundamentally, Shazam never found the business model he clicked. A 2014 Tech.eu story that analyzes Shazam's emerging advertising efforts referred to his "almost useless 12-year-old gallop." Once upon a time, each entrepreneur believed that if they got enough eyes, advertising dollars would follow. But today we know that Facebook and Google have almost absolute dominance in the digital advertising market, on the desktop and on the mobile.

Also, giants like Apple simply have too much cash. With billions of dollars abroad, buying a British company like Shazam with a massive discount does not become a question: why? But in "why not?" In this case, as my colleague Emil Protalinski wrote last week, Shazam will make a good official addition to Siri, where its functionality has already been integrated. Or somehow it will be integrated into the Apple Music service, where it will serve as an ingenious feature.

With scarce advertising dollars and IPO markets remaining weak, it will be increasingly difficult for startups dependent on advertising to remain independent. Instead of trying to escape the gravitational pull of technological giants like Apple, consenting and accepting them to fold in their huge arms may be the best option for these poor unicorns.

Undoubtedly, it is a good sign that Europe is capable of producing a global technology brand like Shazam. But creating a solid independent European technology startup that joins the ranks of the giants of the United States remains a difficult dream to realize at the moment.

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